The Impact Of Government Subsidies And Income Tax Incentives On R&D Investment Of Integrated Circuit Companies

The integrated circuit industry(IC industry),known as ‘E-Oil’,plays a fundamental role in a country’s industry,as it is the core provider for aviation industry,marine industry,machinery,consumer electronics and so many more.To bring more innovation and invention into this vital industry,the government has published a series of policies to stimulate company innovation.Companies in the industry are the most important innovators.Considering that the IC industry is heavy-assets,the policies influence big or small enterprises differently.With the name list provided by China Semiconductor Industry Association and data from enterprises,this thesis focused on the scale of company and its nonlinear influences on the R&D activities.There are three steps in the analysis: Firstly,test if the current policies have worked;secondly,if the policies worked,check if the scale of company has influenced the way the policies work,especially non-linear influence;Thirdly,divide the data up according to different sub-industries,and test the policy effect.The Threshold Model is used to assess the nonlinear effect,with company scale being the threshold variable.This thesis draw the conclusion that the scale of a company does have a threshold effect on the policies’ effectiveness,as companies smaller than a certain scale tend to conduct less R&D activity,while companies bigger than this certain scale tend to get more positive influence from policy.In the last part of this thesis,several suggestions are offered accordingly: companies with smaller scale need more specialized polices such as equipment loaning,cooperation between companies,etc.;companies with larger scale need ample financial support,and working together with research sector could hasten technological development.